Tax cuts for 10 million workers in doubt as Morrison concedes delay to Parliament

Prime Minister Scott Morrison has been told it is "very unlikely" he can convene Parliament before June 30 in a danger sign for his ability to legislate income tax cuts for millions of workers due to take effect on July 1.

The delay has forced the government to look at retrospective action to ensure ten million workers receive a tax offset in their tax returns worth up to $1080 a year and promised in the April 2 budget.

One option is to pay a "supplementary" offset to workers after the law is changed in the new financial year to account for the tax relief promised to them for this financial year.

Prime Minister Scott Morrison has conceded Parliament cannot return before the end of June.Credit:AAP

Mr Morrison said voters wanted their politicians to go "back to work" after Saturday’s election but cautioned on Monday night that it would be difficult to convene the Parliament next month.

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"There’s a lot of work to do and we’re getting about it straight away," Mr Morrison told Sky News.

"We hope to convene the Parliament again as soon as we can. We obviously have to wait for the writs to be returned and there’s a formal process for that. At the moment that’s not looking until very late in the back end of June, so that really does make very narrow that opportunity to do it before the 30th of June."

"I think that’s very unlikely with the advice I’ve received."

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No election promise was as important to the Coalition as its pledge to cut personal income taxes by $158 billion over the decade ahead, on top of a cut worth $144 billion announced in last year’s budget.

A key measure was an offset that would be paid to taxpayers when they lodged their tax returns for the financial year ending on June 30, with the cash flowing to ten million workers.

Some of the tax relief was legislated in 2018 and will deliver an offset worth up to $530 a year.

The Coalition went to the May 18 election with a plan to increase the offset by $550 as soon as it returned to power if it won the election.

But Mr Morrison chose an election date that made his tax promise difficult to deliver. The issue of the writs for the election named June 28 as the date for the return of the writs, raising doubt over whether the Parliament could sit in time to legislate the higher tax relief from July 1.

Asked about the timing of the tax cut before he called the election, Mr Morrison dismissed the problem.

"Well it won't make a difference whether it’s introduced this week or not," he told the Nine Network on April 3.

"If the Labor Party says they support our tax cuts, then the Tax Office can administer it on that basis."

But the ATO said it needed the passage of a law rather than a statement from Labor to apply the tax cut.

Treasurer Josh Frydenberg also insisted before the election that this was not a problem.

"Should the government be re-elected, the timing of the election will not affect low and middle income earners receiving a benefit of up to $1080 - or up to $2160 for a dual income family," he said.

"Taxpayers will be able to access the offset after they lodge their end of year tax returns from 1 July 2019. This is consistent with past practice."

Under the laws passed last year, a worker earning $22,000 would receive a tax offset of $200 but this would scale up to the point where a worker on $48,000 would receive the full $530. The offset would gradually fall for those earning more than $90,000 and phase out at an income level of just over $125,000.

The same income benchmarks apply to the additional $550 if and when it is legislated.

The government is now pinning its hopes on being able to apply the offset to this financial year even if it is only able to legislate the change in the next financial year.

"Tax relief will be delivered in 2019-20 as promised, and will not be delayed by a year by the Parliament not sitting in June as speculated in the media today," said a spokesman for the Prime Minister.

The Australian Taxation Office said last month that it would need legislation passed by Parliament to apply the benefit.

"The ATO requires law in order to deliver the measure as announced, and as such cannot be delivered administratively," it said.

It added, however, that it could take action after the new year.

"If the law for these tax cuts passes after June, we could also retrospectively amend assessments to provide the tax cuts once the law is passed."